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ANALYSIS OF ECONOMIC COSTS AND EXPENSES IN ROAD AND RAIL TRANSPORT

This report compares and contrasts the cost concept which is relevant to the economic analysis of transport with that of the traditional cost analysis. In order to avoid the confusion of using the same word in two senses, the concept put forward here is called "economic cost" while the traditional one is called "expenses". It is the first of these two which is relevant to the efficient allocation of resources. In Chapter 1 the nature of economic cost is set out and it is shown why this is different from expenses. This chapter is concerned with principles and explains them without using the technical language of economics. Chapter 2 critically examines in some detail the traditional type of analysis of expenses. It shows how and why the application of such analysis very often produces results which diverge considerably from the true economic cost of particular traffic movements. Finally, Chapter 3 examines the implications of the economic principles of an approach yielding better insights into the economic costs of traffic movements. /TRRL/